Are You Looking For A Low Down Payment Mortgage?

MortgageAre You Looking For A Low Down Payment Mortgage?

Several loan programs can help home buyers with a lower income and/or low down payment. One such program is the Fannie Mae HomeReady mortgage.

You could pay as little as 3% down on a HomeReady loan. That’s $6,000 down on a $200,000 home — even less than the FHA’s 3.5% down payment.

Plus, you could use gifts, grants, or a down payment loan to help cover your upfront costs. And co-borrowers living in the home or outside of it can be on your application.

This makes HomeReady one of the easiest mortgage programs to qualify for.

About The HomeReady Mortgage

Federal mortgage agency Fannie Mae launched the HomeReady program in December 2015. It’s now available through many major U.S. lenders.

Via the HomeReady loan, home shoppers with lower-than-average income for their area can get easier access to low-down-payment mortgages at today’s current rates.

This program allows a down payment of just 3%.

And as a unique benefit, HomeReady allows a variety of income sources to help your application.

You can apply with co-borrowers living in the home with you or living elsewhere (known as non-occupant co-borrowers). You can also count income from a renter or a boarder on your application, as long as it’s properly documented.

For some families, these unique rules can mean the difference between getting approved for a loan and getting turned down.

Current homeowners can also use HomeReady for a refinance.

The program allows up to 97 percent loan-to-value (LTV) in some cases. That means you don’t need to wait until you have 20% equity to refinance into a lower interest rate and monthly payment.

Qualifying for a HomeReady Loan

To get a HomeReady loan, you’ll have to fall within the program’s income limits, take a short online class about homeownership, and have decent credit.

Exact requirements might vary by lender, but Fannie Mae sets the minimum requirements for all HomeReady loan applications.

Basic requirements for HomeReady include:

  1. You must not earn more than 80% of your Census tract’s median income. Check your area’s median income here
  2. You must agree to complete a 4-6 hour online homeownership education course
  3. You need a FICO score of at least 620 in most cases
  4. You need to use the home as your primary residence
  5. You need a debt-to-income ratio (DTI) no higher than 50%. This is more lenient than most other mortgage programs

If you meet these criteria, the HomeReady loan program may be just what you need to move from renting to homeownership.

Verify your HomeReady eligibility. Start here (Jun 15th, 2022)

HomeReady income limits

Fannie Mae sets income limits for its HomeReady program. To qualify, you can’t make more than 80% of your area’s median income (AMI).

That means if your area has a median yearly income of $100,000, you must make $80,000 or less to qualify for the HomeReady program.

Since HomeReady is intended for lower-income borrowers, these limits might not be a problem for most applicants.

But what if you’re worried your income is too low to qualify?

In that case, the HomeReady loan can help immensely.

HomeReady income source flexibility

Fannie Mae allows applicants to apply with one or more co-borrowers as long as their combined income falls within the local HomeReady income limit.

You can also count income from a renter on your application as long as they’ve lived with you for at least one year prior to buying the home.

Fannie Mae even allows lenders to consider the income of non-borrowing household members as a “compensating factor,” meaning it could help your chances if you have a higher DTI or lower credit score.

Just note that non-borrower income will not be counted directly toward your qualifying income. In addition, these policies can vary by lender, and consideration of non-borrower income may be rare.

Check your income eligibility. Start here (Jun 15th, 2022)

Eligible property types

Borrowers have many options for buying real estate with a HomeReady loan.

You can purchase a traditional single-family home if you wish. But, if you want something a little different, Fannie Mae also allows the purchase of:

  • Condominium units
  • Homes in a planned unit development (PUD)
  • Co-ops
  • Manufactured homes
  • Multifamily homes with 2, 3, or 4 units

Just note, that borrowers who want a multi-unit home will need a higher credit score, possibly as high as 680.

No matter what type of home you buy with HomeReady, it needs to be your primary residence. That means if the building has 2-4 units, you must live in one of the units yourself full-time.

In other words, this loan program can’t be used to purchase investment properties or vacation homes. It’s intended for low and moderate-income buyers looking for a home to live in.

Built with today’s homebuyers in mind

Our low down payment HomeReady® Mortgage is designed to help lenders confidently serve today’s credit-worthy low-income borrowers.

Ideal HomeReady Borrowers

  • Low income
  • First-time or repeat homebuyers
  • Limited cash for down payment
  • Credit score ≥ 620; borrowers with credit scores ≥ 680 may get even better pricing
  • Supplemental boarder or rental income
  • Looking to purchase or refinance

Homeownership Education Requirement

If all occupying borrowers are first-time homebuyers, then at least one borrower is required to take homeownership education, regardless of LTV. Fannie Mae HomeView can be used to satisfy the homeownership education requirement. Learn more.

Required down payment3%3.5%
Cancellable mortgage insurance*
Immediate appraisal orders from lenders
Free from geographic restrictions on loan amounts
Day 1 Certainty® freedom from reps & warrants available

Contact Us To Learn More

Family Home Loan Texas was founded by loan originator and long-time mortgage professional Rob Bramer. Rob has helped clients secure the loans they need both locally and nationally and can help you get the loan you need to live life on your terms. Call 1-800-990-LEND (5363) to speak with Rob about your home loan needs, including conventional mortgages and refinancing.